China's car JVs make for an easy trade sacrifice

HONG KONG: If Chinese officials are looking for a painless concession to make to an irritated Donald Trump, they might consider their automotive joint venture requirement.

The rule forces foreign carmakers to partner with local brands and turn over intellectual property in exchange for market access. The policy, however, has done as much harm as good for local companies.

Ditching it might open doors abroad to export the next generation of Chinese designs.

Frustrated with China's perceived intransigence on North Korea and economic issues, the U.S. president is planning to initiate an investigation into Beijing's tech transfer policy, a long-standing bother.

China's high-speed rail and nuclear power industries are examples of where foreign expertise has been leveraged successfully to develop local champions, which are now competing overseas.

Tech transfer has a mixed record, however. Those pointing to its failures tend to use the domestic car business as an example.

Foreign manufacturers are required to tie up with local peers if they want to sell inside China, and that arrangement has naturally included significant sharing of technology.

Even so, the likes of Volkswagen and General Motors dominate in China. In the first half of 2017, Chinese marques sold slightly over 1 million ordinary passenger cars, only 20 percent of the total, according to the China Association Of Automobile Manufacturers - although Chinese decals did adorn 60 percent of SUVs.

Killing off the JV requirement wouldn't immediately unravel them. Most are too deeply entrenched. With China trying to leapfrog the combustion engine into electric vehicles using its own R&D, tech transfer is less critical.

At the same time, the most dynamic domestic players, including Geely - owner of Volvo - and Great Wall Motor, tend not to be involved in such partnerships.

With growth slowing at home, such companies want to expand overseas. The last thing they need is a trade war with the United States or Europe. Of all China's protectionist policies, this would be a relatively easy one to abandon.